Oil Prices Rise Amid Middle East Tensions
Heightened Risks in the Middle East
Oil prices experienced a boost on Friday due to increased tensions in the Middle East, leading to concerns about potential supply disruptions from the oil-producing region. Despite this, the market is on track for a weekly loss as expectations of fewer U.S. interest rate cuts for the year weigh in.
Geopolitical Factors at Play
The recent attack on Iran’s embassy in Damascus by suspected Israeli warplanes has raised fears of retaliation from Iran, supporting oil prices near a six-month high. Despite rising U.S. inventories, the risk of a geopolitical event occurring over the weekend is keeping the market on edge.
Market Speculations and Price Movements
Oil futures saw a rise on Friday, with Brent climbing 0.9% to $90.53 a barrel, and U.S. West Texas Intermediate crude futures increasing by 1.1% to $85.94. However, prices briefly dipped after the International Energy Agency lowered its forecast for 2024 world oil demand growth.
Anticipating Iran’s Response
Amidst speculations of a potential Iranian attack against Israel, experts predict that any response from Tehran would aim to avoid a major escalation that could draw the U.S. into war. Analysts at ING anticipate oil prices to retreat unless there is a significant escalation in the region or supply disruptions.
Outlook and Forecast
Despite the current rally in oil prices, ING analysts maintain their forecast of Brent crude averaging $87 a barrel in the second quarter of the year. The market remains sensitive to geopolitical tensions and supply concerns in the Middle East.
Weekend Developments and Market Reactions
The gains on Friday offset losses from the previous session, influenced by persistent U.S. inflation that has tempered expectations of an interest rate cut. U.S. Federal Reserve officials have indicated a cautious approach towards rate adjustments due to ongoing inflation concerns.
